Nigerian Naira Weakens To The Dollar As The CBN Fails on Forex Auction

August 11, 2011 – Nigerian Naira Weakens To The Dollar As The CBN Fails on Forex Auction

Nigerian Naira, on Wednesday, weakened against the U.S dollar on the interbank market after the Central Bank of Nigeria (CBN) failed to clear all demand at its forex auction.

The naira, which closed at 154.04 to the dollar, its lowest in the last two months, compared to 152.80 per dollar on Tuesday.

The CBN had on Monday sold $250 million at 150.75 to the dollar at its auction, short of the $369.30 million demanded and the $450 million sold at 150.50 to the dollar.

Traders said the naira weakened against the dollar on both segments of the forex market due to strong demand for the dollar and coupled with the fact that the CBN was unable to clear all demand at the auction.

Analysts say the currency weakness is not good for the economy considering the fact that the country’s foreign exchange reserves rose to 6-month high of $35.90 billion on August 8, from $32.55 billion on August 1, according to CBN’s latest figures shown on Tuesday.

The report shows that foreign reserves were lower than a year ago, when they stood at $37.80 billion.

Analyst and traders also said that the naira will continue to depreciate unless there is a major dollar inflow from oil companies.

Chevron sold $33.5 million to some lenders on Tuesday, while Addax sold $7 million on Wednesday, but it was not sufficient to support the naira.

Meanwhile, the naira had a boost on Monday after NNPC sold around $500 million to some banks, as it was its second major sale in six days.